Apple's key manufacturing partner, Foxconn, warned that electronics sales in its current quarter could fall amid cooling smartphone demand and supply chain challenges in China. Apple stock sank on the news Thursday.
Taiwan-based Foxconn, formally called Hon Hai Precision Industry, gave cautious commentary for the June quarter after reporting results for the March quarter. Foxconn is Apple's primary iPhone assembler.
In the first quarter, Foxconn's total revenue rose 4% and its net profit increased 5%, Reuters reported. But it sees flat revenue for the current quarter and full year.
Foxconn blamed the economic impact of Covid lockdowns in China, high inflation, and fallout from the Russia-Ukraine war as factors in slowing consumer demand for electronics, including smartphones.
Apple Stock Sinks After Foxconn Report
"There are many uncertainties in the market at the moment," Foxconn Chairman Young Liu said on a post-earnings call. He cited the pandemic, geopolitical risks and inflation.
"They are presenting quite some challenges to demand and supply," Liu said.
Foxconn also makes products for Dell Technologies, HP, Sony and Alphabet's Google, among others.
On the stock market today, Apple stock fell 2.7% to 142.56.
On April 28, when Apple reported its March-quarter results, it said Covid-related shutdowns in China will negatively impact its June-quarter performance. It said chip shortages and Covid disruptions could lower revenue in the current quarter by $4 billion to $8 billion.
Apple Stock In Correction
"Foxconn is expecting a slight year-over-year revenue decline in the June quarter, which we think is consistent with Apple messaging," Evercore ISI analyst Amit Daryanani said in a note to clients. He reiterated his outperform rating on Apple stock with a price target of 210.
"Apple did not provide formal revenue guidance, but we think their commentary implies revenue will be down low single digits — worth noting Foxconn commentary is related to hardware (iPhones notably), services growth could be a partial offset here," Daryanani said.
Since hitting a recent high of 179.61 on March 30, Apple stock has fallen 20.6%.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
